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Posts tagged ‘gifts’

Russell Alexander Collaborative Family Lawyers’ First Annual Holiday Toy Drive

Poster for Russell Alexander Collaborative Family Lawyers' Toy Drive

 

Russell Alexander Collaborative Family Lawyers are pleased to announce the start of their First Annual Holiday Toy Drive. This year the drive will be supporting Bethesda House located in the Durham Region and A Place Called Home located in The City of Kawartha Lakes.

New, unwrapped gift donations can be made in the Brooklin office for the Bethesda House. They have informed us of the lack of gifts for children 13-17 years of age. Some gift suggestions for them include:

  • Sports equipment
  • Art supplies
  • Games
  • Movie passes and gift cards
  • Purses and backpacks
  • Make-up, lotion, perfume
  • Hats and scarves

The Lindsay office is accepting new, unwrapped gifts to be donated for A Place Called Home. There is no recommended age for donations for this organization.

If you wish to donate to the toy drive this year, it will be running from November 1, 2018 through to December 7, 2018. You may drop by with your donation in the Brooklin or Lindsay office any time between 9:00 a.m. and 5:00 p.m. on Monday to Friday. For further details, feel free to give our office a call at 905-655-6335.

Recurring $50,000 Annual Gift – Should it be Included in Husband’s “Income”?

recurring gift

Recurring $50,000 Annual Gift – Should it be Included in Husband’s “Income”?

In a recent decision called Horowitz v. Nightingale, the key question for the court was whether, in calculating the husband’s annual “income” for equalization purposes, the total should include a regular gift of $50,000 he received each year from his wealthy parents.

The couple had been married about 16 years when they separated. They had three children together, each of whom had special needs. The wife was looking for about $35,000 per month in spousal and child support, based on the husband’s income which her experts estimated was about $1.7 million for 2013, and over $3 million for 2014, including certain withdrawals the husband made from his RRSP. The husband, in contrast, claimed that his overall income for 2013 was under $600,000, and that his support obligation should be adjusted downwards accordingly.

As part of the task of ascertaining the husband’s true income for these purposes, the court was accordingly asked to characterize the $50,000. The parties were at odds on whether the annual cash gifts were regular enough to be counted: The wife claimed that they had been consistently given in the past, and could be counted on to recur in the future. To bolster her position, she produced an excerpt from an e-mail she received from the husband in which he confirmed that the gift was regularly given each year. It read:

It’s a good thing my father gave me $50,000 each year to help with all your expenses (my parents have the cancelled cheques). Don’t expect to see that anymore. And the money many years I had to take out of my RRSP to pay for everything. Don’t expect that to happen anymore.

The husband refuted that the gifts were regular; moreover he pointed out that his father had had passed away recently. Since the gifts had come from both parents (rather than from either of them individually) there were no guarantees, he said, that his widowed mother would keep up the generosity now that the father was gone.

The court started the examination by pointing out that in law, both child and spousal support was governed by the provisions of sections 15.1 and 15.2 of the federal Divorce Act. Those sections provides a list of factors that the court must consider whether ordering the amount of temporary support the husband had to pay the wife in this case. One of them was the consideration of the husband’s means, and his corresponding ability pay support in all the circumstances.

Next, the court observed that for child support purposes, gifts received by a parent are not presumed to be part of part of his or her presumptive annual income; however, under the Child Support Guidelines, the court had discretion to impute income if it was considered appropriate in the circumstances. However, “gifts” was not among the non-exhaustive list of amounts/items a court could impute.

The court then considered prior law on this issue, which confirmed the receipt of gifts was not generally an appropriate circumstances in which to impute income to the recipient. However, that precedent also established a list of other factors, all of which could be considered in this case, including: how regular the gifts are (or whether there were circumstances that made them exceptional); how many years they had been given by the parents to the husband; whether they were part of the family’s income and lifestyle while the couple was together; the income generated by the gifts relative to the husband’s entire income; their true purpose and nature; and whether they are likely to continue.

With this in mind, the court turned to the present facts: The $50,000 gift had been given by the husband’s parents in each of the prior 8 years, since 2006, as confirmed in the husband’s e-mail. He testified that “every dollar” had been used for family purposes, which meant the funds were part of the family’s overall income, and contributed to the lifestyle they came to enjoy. Finally – while conceding that there was no obligation on the husband’s mother to continue making the gifts at all, in the same amount, or with the same regularly – the court concluded that they were likely to continue in the immediately foreseeable future. (Incidentally, the husband had given no specific evidence as to how his father’s death might affect whether there would be future gifts, nor had he presented to the court any copies of the cashed cheques, even though they were available to him. The court drew a particularly negative inference from this latter omission on the husband’s part).

The court therefore concluded that the annual $50,000 annual gift should indeed be considered part of the husband’s income, for the purposes of calculating both spousal support and child support.

For the full text of the decision, see:

Horowitz v. Nightingale, 2015 ONSC 190

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com

Know the Law When Accepting Gifts

Know the Law When Structuring – and Accepting – Gifts

A recent Ontario Court of Appeal case illustrates the treatment of gifts for family law purposes, and highlights the importance of getting competent legal advice when structuring gifts by way of estate freezes and other complex legal mechanisms.

The decision in McNamee v. McNamee involved a husband named Clayton and a wife named Connie.  They separated in 2007, after being married for almost 20 years in what was an equal partnership in all respects.  They had two children.   Clayton worked for his father’s very successful concrete trucking company as head of a construction division.

The issue for the court was whether 500 shares in the trucking company that Clayton received from his father were properly considered a “gift” – and therefore exempt from being included in his Net Family Property (NFP) upon separation from Connie, in accordance with Ontario family law.  The shares were worth more than $400,000.

The father’s share transfer had been accomplished in a complicated and unusual manner using an estate freeze, and was done reluctantly on the advice of his accountant and lawyer.  Its main purpose was to protect his business from creditors and to limit the tax impact upon his death.   It involved folding the business into a holding company, fixing its value, accruing that value back to himself, using a second holding company, then undertaking a series of share transfers.  The end result was that Clayton and his brother were each directly transferred 500 shares of their father’s trucking company, but the father expressly retained control (by retaining voting shares and the discretion to take unlimited dividends, both of which are unusual features in an estate freeze).  

The father also signed a Declaration of Gift for the purposes of documenting the transaction.  However – unbeknownst to Clayton – the father intended the shares to be excluded under Ontario family law from both of his sons’ NFPs, in the event either of them separated from their spouses.  The Declaration of Gift therefore specified that the shares (and any increase in their value or income) were expressly excluded from NFPs, and that they were to remain the sons’ separate property, free from either of their wives’ control.

Needless to say, when Clayton and Connie separated, the treatment of $400,000 in shares became an issue, and Connie ended up taking the matter to court.  She disputed Clayton’s position that the shares should be excluded from his NFP as a “gift” after marriage, like his father intended.    The trial judge found in Connie’s favour, included them in Clayton’s NFP, and awarded Connie half their value upon equalization.

Clayton appealed that decision to the Ontario Court of Appeal.  He was successful in having a new trial ordered on the specific question of whether a constructive trust was in existence (since this issue was not dealt with at trial in light of the trial judge’s findings on the NFP exemption question).

The Court of Appeal began its analysis by observing:  

The trial judge found as a fact that “[if] Clayton and Connie had been asked as to their intention with regard to the shares [prior to separation], they both would have readily confirmed their intention to share in that benefit equally.” This finding is supported in the evidence.  The legal effect of the transfer of the shares in the marital breakdown context is not that simple, however.

In this case, Clayton had clearly received these shares as a “gift: from his father; the trial judge had erred in finding otherwise.  Although “gift” is not defined by the Family Law Act, it consists of a voluntary transfer of property without consideration, and is a gratuitous, unilateral transaction.   Here, all the necessary legal elements were present, specifically:

1) an intent by the father to make a gift to Clayton, without expecting remuneration in exchange;

2) acceptance of the gift by Clayton; and

3) a sufficient act of delivery or transfer to complete the transaction.  

The signed Declaration of Gift was further proof of the father’s intentions.

The Court of Appeal also pointed out that the trial judge was wrong in concluding that this could not be a “gift” because the father’s intention was not inspired by affection, respect or charity.  That was not the correct test.   Also, the mere fact that Clayton did not know that conditions were attached to the gift did not serve to invalidate the effectiveness of it.   There is a distinction between the father’s “motives” and his “intent”:   Simply put, the father’s intent was to give Clayton a gift, and Clayton was aware of the gift and had accepted it.  

In the end, the Court of Appeal sent the matter back for trial on the issue of whether a constructive trust existed over these shares; unless Connie could show that she had a beneficial interest in them at trial, they would be excluded from Clayton’s NFP.

Russell Alexander, Family Lawyers focus exclusively on family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders.  For more information, visit www.RussellAlexander.com.

For the full text of the decision, see:

McNamee v. McNamee, 2011 ONCA 533 (CanLII)